Fungibility is a spectrum. Monero is probably the most fungible thing we have, small amounts of cash is next (large amounts are less fubgible), then gold. Fiat in a bank account is the least fubgible. When it comes to bitcoin it's a pretty good balance between making large scale State level corruption impossible while also making small transactions pretty fubgible. Rememeber that UTXOs get sliced and diced through history, it's like how we've probably all breathed in an oxygen atom that Hitler also breathed in.